Country Report December 2003

Fiji

December 2003

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Contents

3 Summary 3 Fiji 3 The region

4 The region 4 Outlook for 2004-05 5 The political scene 6 Economic policy and the domestic economy

7 Political structure

8 Economic structure 8 Annual indicators 9 Quarterly indicators

10 Outlook for 2004-05

11 The political scene

13 Economic policy

14 The domestic economy

List of figures

15 Gross domestic product 15 Consumer price inflation

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Summary December 2003

Outlook for 2004-05 The outcome of a political duel between by the prime minister, Laisenia Qarase, and the leader of the Fiji Labour Party (FLP), Mahendra Chaudhry, over the composition of the cabinet has been referred back to the Supreme Court, and political uncertainty will therefore continue well into 2004. More coup- related trials next year could revive sentiments of Fijian nationalism. The ailing state of the sugar industry will mar otherwise bright economic prospects.

The political scene The tussle over the number of cabinet jobs to which the FLP is entitled has been referred back, by mutual agreement, to the president, Ratu Josefa Iloilo, who has passed the matter to the Supreme Court. There are signs that the Indian community is growing tired of Mr Chaudhry’s confrontational style. Outside the political arena, efforts have been made to heal divisions between the Indian and indigenous-Fijian communities.

Economic policy and the The government is likely to have exceeded its budget deficit target for 2003. It domestic economy rather optimistically hopes to reduce the budget deficit to 3.5% of GDP in 2004. The 2004 budget contains a mixed bag of tax changes. Plans to scrap civil servants’ cost-of-living rises have been criticised by the major public-service trade unions. Concern about the sugar industry has overshadowed the economic recovery.

The region

Outlook for 2004-05 Australia’s intervention in the Solomon Islands and a gradual amelioration of communal stresses in Fiji should help improve political stability in the region. Despite modest growth, little headway will be made by small, isolated and resource-poor island nations in tackling their many problems.

The political scene Debate over the appointment of an Australian, Greg Urwin, as secretary-general of the Pacific Islands Forum has quickly subsided. China and Taiwan have continued to woo the island nations with aid. The region has begun to face up to the spread of HIV/AIDS.

Economic policy and the Island countries have been warned that they are ill-prepared to cope with domestic economy Severe Acute Respiratory Syndrome (SARS). Tourism bookings are set to pick up in 2004, although the launch of Pacific Blue, the new offshoot of Virgin Blue, an Australian-based budget airline, has been pushed back to mid-2004. The islands have begun to prepare for trade negotiations with the EU. Concern is growing about the depletion of tuna stocks. Editors: Kate Allard (editor); Graham Richardson (consulting editor) Editorial closing date: December 3rd 2003 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule

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The region

Outlook for 2004-05

Most island nations will Australia’s intervention in the Solomon Islands, a reshaping of its aid relations experience modest growth with Papua New Guinea (PNG) and a gradual amelioration of communal stresses in Fiji should help improve political stability in the region. The Economist Intelligence Unit anticipates modest growth for most of the island nations, along with a continued fall in inflation, with most island nations banking on tourism and the exploitation of tuna stocks for their future economic security. However, little headway will be made by small, isolated and resource-poor countries in tackling problems presented by population pressures in some island nations, migration in others, environmental degradation, corruption and weak economic growth. After a decade of near-inaction, Pacific island governments are finally facing up to the advance of HIV/AIDS into the region. But we remain pessimistic about the ability of most governments to overcome this and other challenges without steady, sympathetic support, coupled with measured pressure, from aid donors.

Another Australian-led Australia’s firm hand in the Solomon Islands is broadly approved of, although intervention is unlikely not necessarily publicly so, by the other 13 island members of the Pacific Islands Forum (the main regional body). In the Solomon Islands in particular, grass-roots opinion is generally one of relief felt by a people disillusioned by the erosion of basic government services, worsening employment oppor- tunities, lack of development and rising crime, made worse by corruption and poor governance. However, the picture of the region often portrayed—one of general lawlessness, political and economic collapse and infiltration by undesirable foreign forces—is probably exaggerated. With the exceptions of the chaos and national insolvency associated with a succession of governments in Nauru and the long-term prospect of a democracy-inspired change of government in monarchist Tonga, the Pacific island states are generally more stable that they are given credit for, and an intervention such as that currently under way in the Solomon Islands is unlikely to occur elsewhere in the region.

The island nations will Given the inevitable economic weaknesses stemming from their isolated struggle to fulfil aid conditions geographical position and, in Polynesia and Micronesia, an acute lack of resources and land, the Pacific island states can be assured of continued substantial support from Australia, New Zealand, the EU, Japan and, increasingly, China, as well as institutions such as the Asian Development Bank and the UN Development Programme. However, while most island countries are resigned to the conditions, such as higher standards of governance, greater transparency and accountability, now being attached to aid, they are not well equipped to fulfil them.

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The political scene

Debate over new Australian Debate over the appointment in August of an Australian, Greg Urwin, to the head of the PIF has subsided position of secretary-general of the Pacific Islands Forum or PIF (the post has traditionally gone to a Pacific islander) quickly subsided. During and after the PIF summit meeting at which delegates failed to reach consensus on a replace- ment from the Pacific islands for the incumbent, Noel Levi of PNG, some leaders chose to interpret Mr Urwin’s appointment as yet another symbol of Australia’s strong hand in the region. But privately many regional bureaucrats and PIF staff agreed that Mr Urwin was by far the best candidate to implement improvements to the organisation and redirect work programmes and policies While attending the Asia-Pacific Economic Cooperation (APEC) summit meeting in November as an observer, the retiring PIF secretary-general, Mr Levi, asked APEC members to consider extending their relationship with PIF members in the same way as the EU has already done. Mr Levi also suggested that APEC assist PIF countries in compiling individual country reports for inclusion in APEC’s investment climate guide. In his address to the Conference of the Pacific Community in Suva in November, the prime minister of Fiji, Laisenia Qarase, complained that the number of regional organisations had mushroomed in recent years, diverting island governments’ scarce financial resources to regional and international bureaucracies. He added that in his opinion many of the regional meetings and workshops were of little value.

China and Taiwan continue to The battle between China and Taiwan for influence in the region has woo island nations with aid intensified in recent months. China has wooed Nauru and the Cook Islands with offers of aid, and has also won support for its One China policy from Fiji and Tonga—both recipients of substantial Chinese aid, as are Samoa and Papua New Guinea. However, China experienced a setback in Kiribati in November when the newly elected president, Anote Tonga, established diplomatic relations with Taiwan, whose ambassador arrived at Tarawa, the most populous island, almost immediately after the election. China has made threatening noises about breaking ties with Kiribati, where it has an embassy, but it does not wish to lose the tracking station it operates at Tarawa. A number of Pacific island leaders briefly met the US president, George W Bush, when he passed through Hawaii on the way home from visits to South- east Asia and Australia. The encounter is unlikely to yield any tangible benefits for a region that the US regards as the responsibility of Australia.

The region has begun to face A long overdue assault on the spread of HIV/AIDS in the region began in late up to the advance of HIV/AIDS 2003, funded by Australia and a grant from the UN-backed Global Fund. According to the Pacific Community (a technical assistance agency based in New Caledonia that covers all 22 Pacific island countries), the incidence of the disease is highest in PNG, French Polynesia, Guam and New Caledonia, followed by Kiribati and the Marianas Islands. AIDS is now the major cause of death at Port Moresby general hospital in PNG.

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Economic policy and the domestic economy

PIF island members prepare In September and October PIF island members held a series of workshops to for trade negotiations with EU prepare for negotiations on new trade arrangements with the EU under the Cotonou Agreement, an agreement signed in June 2000 to succeed the Lomé Convention, setting out trade relations between the EU and the 78 African, Caribbean and Pacific (ACP) states. Negotiations are due to commence in mid- 2004, and the resulting agreement is scheduled to take effect in January 2008. In addition to market access for their very limited product range, the island states are seeking technical assistance to help develop management skills in areas such as fisheries, tourism and agriculture, as well expertise in fiscal reform and the development of services. With the assistance of the PIF, kava producers are preparing a campaign to recover substantial markets worth tens of millions of US dollars per year, lost by Vanuatu, Samoa, Fiji and Tonga when European governments, led by Germany, banned kava exports early in 2002. The producer countries insist that claims that kava-based medicinal products cause liver damage are wrong.

Island countries warned over The Pacific Community warned in November that the region was not equipped measures to cope with SARS to cope with an outbreak of Severe Acute Respiratory Syndrome (SARS). The outbreak of SARS in some Asian countries in early 2003 did not reach the region, but there are concerns that a fresh outbreak could spread to the islands, with devastating consequences for the regional tourism industry.

Tourist bookings are expected Tourist bookings to most Pacific destinations are expected to pick up in 2004, to pick up in 2004 with the Pacific island nations continuing to be viewed as low-risk in terms of terrorism. Tourism in several of the island nations will receive a further boost when Virgin Blue extends its services to New Zealand and some Pacific islands countries through an offshoot to be known as Pacific Blue—although the launch of the first flights, to Fiji and Vanuatu, has now been pushed back until mid-2004. A New Zealand operator plans to launch low-cost flights to Fiji in direct competition with Air New Zealand and the Fiji international carrier, Air Pacific. However, by making travel to Fiji cheaper, the growing competition could erode visitor arrivals to less well-served destinations, such as Samoa, Vanuatu, Tonga and the Cook Islands. Meanwhile, the Association of South Pacific Airlines (ASPA), which represents most of the region’s major airlines, has given a cool reception to the launch of an Australian-sponsored study of the feasibility of a single regional airline. According to APSA, survival for its struggling members depends on maximum co-operation between the airlines rather than full integration.

Concern is growing over Recent research on tuna and billfish stocks suggests that the high-priced depleted tuna stocks yellowfin tuna fish, one of the four species that are the core of the region’s US$2bn fisheries industry, is being overfished and needs to be conserved. At an estimated 438,000 tonnes in 2003, the regional yellowfin catch is likely to be the lowest in six years. Two other tuna species, albacore and skipjack, remain in good shape and could withstand further exploitation, although stocks of big- eye tuna, like those of yellowfin tuna, are becoming severely depleted.

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Political structure

Official name Republic of Fiji Islands

Form of state Parliamentary

The executive The president, appointed by the Great Council of Chiefs (Bose Levu Vakaturaga), appoints the prime minister, who selects the cabinet

Head of state The president, Ratu Josefa Iloilo

National legislature Bicameral parliament comprising an appointed upper house, the Senate (32 members), and an elected lower house, the House of Representatives (71 members). The 1997 constitution prevented the dominance of parliament by indigenous Fijians and abolished the requirement that the prime minister be an indigenous Fijian. There is universal suffrage for all citizens aged over 21. Voting is compulsory and preferential

Regional government Local administration is on a divisional basis, with separate councils for urban areas. There is a separate local government system for the indigenous Fijian population

Legal system Magistrates’ courts, High Court and Court of Appeal, presided over by the Supreme Court

National elections August 25th-September 1st 2001; the next election is due by 2006

Main political parties Soqosoqo Duavata ni Lewenivanua (SDL, People’s Unity Party); Fiji Labour Party (FLP); Matanitu Vanua (MV, Conservative Alliance); National Labour Unity Party (NLUP); National Federation Party (NFP); United General Party (UGP)

National government On September 10th 2002 Laisenia Qarase, the leader of the SDL, was appointed prime minister. The cabinet comprises 15 SDL members, two from the MV, two from the NLUP and one independent. In defiance of the constitution, Mr Qarase named a cabinet that did not include any members of the FLP. In July 2003 the Supreme Court upheld the contention of the FLP leader, Mahendra Chaudhry, that his party was constitutionally entitled to cabinet seats

Prime minister & minister for Fijian affairs Laisenia Qarase

Key ministers Agriculture, sugar & land resettlement Jonetani Galuinadi Commerce, business development & investment Tomasi Vuetil ovoni Education Ro Teimumu Kepa Finance & national planning Ratu Jone Kubuabola Foreign affairs & external trade Kaliopate Tavola Home affairs & immigration Joketani Cokanasiga Labour, industrial relations & productivity Kenneth Zinck Lands & mineral resources Ratu Naiqama Lalabalavu Multi-ethnic affairs George Shiu Raj National reconciliation, information & media Simione Kaitani Public enterprises & public-sector reform Irami Matairavula Tourism, culture, heritage & civil aviation Konisi Yabaki Women, social welfare & poverty alleviation Adi Asenaca Caucau

Central bank governor Savenaca Narube

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Economic structure

Annual indicators 1999a 2000a 2001a 2002a 2003b GDP at current prices (F$ m; at factor cost)c 3,137 3,071 3,300 3,463 n/a Real GDP growth (av; %)c 9.6 -3.2 3.0 4.1 4.8 Consumer price inflation (av; %)c 0.2 3.0 2.3 1.6 4.1 Population (m)c 0.81 0.81 0.82 0.83 n/a Exports fob (US$ m)d 609 584 538 546 n/a Imports cif (US$ m)d 903 825 794 893 n/a Current-account balance (US$ m)d -72 -90 -56 n/a n/a Reserves excl gold (US$ m)e 428.7 411.8 366.39 358.8 n/a Total external debt (US$ m)f 235.6 208.7 188.1 n/a n/a Debt-service ratio, paid (%)f 3.5 2.7 2.0 n/a n/a Exchange rate (av; F$:US$)e 1.970 2.129 2.277 2.187 1.910 a Actual. b Economist Intelligence Unit estimates. c Reserve Bank of Fiji, Quarterly Review. d Asian Development Bank. e IMF, International Financial Statistics. f World Bank, Global Development Finance.

Origins of gross domestic product 2002a % of total Components of gross domestic product 2001b % of total Agriculture, forestry & fishing 16.1 Private consumption 57.0 Mining & quarrying 2.5 Government consumption 17.1 Manufacturing 15.6 Fixed investment 14.5 Construction 4.3 Stockbuilding 1.0 Electricity & water 4.4 Exports of goods & services 55.7 Transport & communications 13.6 Imports of goods & services 60.7 Wholesale & retail trade, restaurants & hotels 19.5 Statistical discrepancy 15.4 Other services 24.0

Principal exports 2002a F$ m Principal imports 2002a F$ m Garments 245.4 Machinery & transport equipment 451.1 Sugar 235.0 Manufactured goods 409.2 Fish 89.9 Food 337.6 Gold 78.1 Mineral fuels 330.3 Timber 41.5 Miscellaneous manufactured articles 213.8

Main destinations of exports 2002a % of total Main origins of imports 2002a % of total Australia 23.3 Australia 42.3 US 19.5 New Zealand 19.2 UK 15.3 US 6.6 Pacific Islands 8.2 Singapore 5.4 Japan 5.7 Japan 4.8 a Reserve Bank of Fiji, Quarterly Review. b Asian Development Bank.

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Quarterly indicators 2001 2002 2003 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr Government finance (F$ m) Total revenue & grants 255.9 177.7 331.8 258.9 n/a n/a n/a n/a Expenditure 383.2 244.5 352.8 350.7 n/a n/a n/a n/a Balance -127.3 -67.2 -20.7 -91.7 n/a n/a n/a n/a Prices Consumer prices (1993=100) 125.1 125.8 126.0 125.1 125.5 130.1 131.2 130.5 Consumer prices (% change, year on year) 2.3 1.0 0.9 0.8 0.3 3.4 4.1 4.3 Financial indicators Exchange rate F$:US$ (av) 2.293 2.294 2.185 2.152 2.117 2.004 1.915 1.883 Exchange rate F$:US$ (end-period) 2.309 2.270 2.115 2.164 2.065 1.992 1.873 1.842 Bank (end-period; %) 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 Deposit (av; %) 0.77 0.72 0.62 0.57 0.56 0.57 0.52 n/a Lending (av; %) 8.22 8.18 8.14 8.02 7.9 7.8 7.60 n/a Money market (av; %) 0.83 1.00 1.00 0.83 0.85 0.87 0.79 0.99 Treasury bill (av; %) 1.56 1.70 1.70 1.68 1.56 1.23 0.55 1.25 M1 (end-period; F$ m) 620.9 640.0 661.2 681.7 712.0 843.1 744.9 n/a M1 (% change, year on year) 4.6 3.4 10.6 14.5 14.7 31.7 12.7 n/a M2 (end-period; F$ m) 1,467.1 1,498.7 1,523.7 1,548.8 1582.6 1,727.9 1,683.5 n/a M2 (% change, year on year) -3.1 -0.4 3.9 5.7 7.9 15.3 10.5 n/a Sectoral trends Sugar exports (‘000 tonnes) 98.2 15.6 32.3 102.8 135.8 26.0 34.7 79.1 Tourism, visitor arrivals ('000) 92 88 95 115 100 86 101 130 Tourism, length of stay (av; days) 8.4 8.4 8.4 9.0 8.5 8.5 8.6 n/a Tourism, gross earnings (F$ m) 131.3 124.3 130.3 174.0 139.0 124.1 139.3 n/a Foreign trade (F$ m) Exports foba 367.9 211.1 266.5 345.4 367.1 223.5 343.4 302.7 Imports cif -487.0 -380.2 -484.0 -507.5 -581.5 -467.8 -725.8 -501.2 Trade balance -119.1 -169.1 -217.5 -162.1 -214.4 -244.3 -382.4 -198.5 Foreign reserves (US$ m) Reserves excl gold (end-period) 366.4 346.3 358.0 356.2 358.8 332.2 372.3 n/a a Includes re-exports. Sources: International Sugar Organisation, Statistical Bulletin; Fiji, Bureau of Statistics; IMF, International Financial Statistics; Reserve Bank of Fiji, Quarterly Review.

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Outlook for 2004-05

Political uncertainty will The outcome of a political duel between by the prime minister, Laisenia extend well into 2004 Qarase, and the leader of the Fiji Labour Party (FLP), Mahendra Chaudhry, over the composition of the cabinet has been referred back to the Supreme Court, and political uncertainty will therefore continue well into 2004. As a result, local and foreign investors will continue to harbour reservations about the security of investment in the country. The court ruled in mid-2003 that the FLP was constitutionally entitled to representation in the cabinet in proportion to its parliamentary numbers and should be given the seats “forthwith”. But Mr Qarase is reluctant to risk losing support for the coalition government, led by his predominantly indigenous Fijian party, Soqosoqo Duavata ni Lewenivanua (SDL, People’s Unity Party), by ejecting ministers from the minor parties in his coalition government to make room for the FLP in his 22-member cabinet. Instead he has offered 14 junior seats to the FLP. Mr Chaudhry has rejected the portfolios as a breach of the spirit of real power-sharing as intended by the constitution, and he moreover claims that the number of FLP seats should be increased to 17. Mr Qarase has said he will accept the court’s ruling (due in May 2004). He is, however, likely to insist that Mr Chaudhry must either accept whatever portfolios are attached to the cabinet posts specified by the court, or else abandon his attempts to secure a place in the government and accept the role of leader of the opposition so far rejected by him. Relations between Mr Qarase and army commander, Commodore Frank Bainimara, who opened the door to Mr Qarase’s elevation to power as interim prime minister after the coup of 2000 that toppled Mr Chaudhry’s government, are also likely to remain strained. Commodore Bainimarama has complained that the government is trying to curb the power of the army by cutting military expenditure and pegging the army’s manpower at 2,950—moves that could lead to 380 regular soldiers being made redundant.

More coup-related trials could The trials in the first half of 2004 of the vice-president, Ratu Josefa Seniloli, two revive Fijian nationalism cabinet ministers and the deputy parliamentary speaker could revive sentiments of Fijian nationalism. The politicians are charged with having administered or taken illegal oaths in 2000 when rebels holding Mr Chaudhry’s government hostage in parliament attempted to form a government. A number of other influential political and business figures also fall within the scope of police inquiries; they include the former police commissioner, who is now Fiji’s ambassador to the UN.

The ailing sugar industry will Uncertainty about the prospects for averting the collapse of the failing 120-year- mar economic prospects old sugar industry, coupled with the latest rejection by Mr Chaudhry of a proposal to replace expiring 30-year agricultural leases of Fijian clan land with mainly Indian cane-grower tenants with 50-year leases, will remain at the heart of Fiji’s political troubles. However, while another intervention by the army cannot be ruled out, the mood in favour of reconciliation evident in some sectors of the Fijian and Indian communities, combined with a recent revival in

investment, suggests that the country’s difficulties are not now as intractable as they are often portrayed. Optimism about the country’s future is reflected by the EU’s recent lifting of a freeze on F$50m (US$26m) of aid destined for primary and vocational education that was imposed after the 2000 coup. Other positive signs are ongoing investment in multi-storey office buildings, the construction of three major and several small tourist resorts, and the opening of call centres, among other projects. Along with strong growth in tourism—which has been remarkably little affected by the Iraq war and the outbreak of Severe Acute Respiratory Syndrome (SARS) in parts of Asia—and the expansion of the wholesale and retails trades, this is likely to have underpinned real GDP growth of around 4.8% in 2003. Growth is likely to slow modestly in 2004, dragged down by an expected contraction in the sugar industry.

The political scene

The two main political leaders The personal acrimony between Laisenia Qarase, the prime minister and remain at loggerheads leader of the ruling indigenous Fijian party, Soqosoqo Duavata ni Lewenivanua (SDL, People’s Unity Party), and Mahendra Chaudhry, the leader of the Fijian Indian-dominated Fiji Labour Party (FLP) and unofficial leader of the opposition in the 71-seat House of Representatives, has continued to dominate the political scene. A long-awaited Supreme Court ruling confirming that the FLP is entitled to seats in the cabinet led Mr Qarase to propose increasing his cabinet to 36 ministers and giving the FLP 14 inconsequential portfolios (September 2003, page 11). But Mr Qarase has also stated that Mr Chaudhry, a personality he claims he cannot work with, and Poseci Bune, a former senior Fijian bureaucrat, were not acceptable to him as members of an enlarged ministerial team. Mr Chaudhry took this exclusion as an insult, and said that the prime minister had a duty to set aside personal differences for the sake of making a multiparty government work.

The cabinet composition issue The offer of 14 ministries, and Mr Chaudhry’s claim for 17, has been widely is referred back to the courts criticised in the press and by some civil society organisations, not only because

of the extra cost of an enlarged cabinet (estimated at more than F$3m, or US$1.6m, a year), but also because a cabinet of that size would outnumber backbench members of parliament (MPs). The tussle over how to calculate the number of cabinet jobs to which the FLP was entitled was finally referred, by mutual agreement, to the president, Ratu Josefa Iloilo, who has passed the matter to the Supreme Court. A hearing is expected some time in May 2004. Mr Chaudhry has said that in the meantime he sees no point in continuing dialogue with the prime minister through the so-called Talanoa informal meetings held from time to time under the chairmanship, as conciliator, of a Tongan academic, Dr Sitiveni Halapua, who is the director of the Pacific Islands Development Programme at the East-West Center, Hawaii.

Efforts are made to heal other In notable contrast to the tension between the leaders of the two main parties, political divisions the Great Council of Chiefs, led by Ratu Epeli Ganilau, has exhibited a desire to remove itself from politics, in which it became embroiled during the 2000 coup, and foster rapprochement with the nervous Indian community. As guest speaker at a number of meetings of Indian organisations, Ratu Epeli has assured the Indian community of its place in the country, and of the council’s desire to facilitate the renewal by Indian tenant farmers of leases on land owned largely by indigenous Fijians, or find alternative land for outgoing tenants. The Sugar Cane Growers Council (SCGC, which represents 22,000, mainly Indian, growers) and the Fiji Girmit Council (an association of the descendents of indentured plantation workers brought from India in the late 19th and early 20th centuries) have also sent delegates to the Great Council of Chiefs to ask for support in dealing with the problem of expiring land leases and the resettlement of tenant farmers. The approach to the chiefs, made in formal customary Fijian style in November, was without precedent and was well received, with Ratu Epeli saying that the chiefs accepted their responsibility to act in the interests of all citizens, regardless of race.

Mr Chaudhry faces growing Mr Chaudhry has claimed that neither the SCGC, nor the Fiji Girmit Council, is dissent representative of the Indian community, implying that he alone is. But an attempted rebellion against his authority in October by officials of the Labasa branch of the National Farmers Union (NFU, through which Mr Chaudhry, as head of the organisation, commands substantial support from Indian cane- growers), and criticism from other elements in the Indian community, is indicative of the disenchantment felt by a growing number of Indians with his confrontational tactics. During the Council of Chiefs meeting, Adi Lala Mara, the wife of Fiji’s first prime minister, Ratu Sir Kamisese Mara, who was virtually forced from presidential office in 2000, attacked what she said were dark Fijian forces still hoping to grab power. Ms Lala, an influential chief in her own right, dismissed the notion that the 2000 coup had been carried out in support of indigenous power, saying that it was about greed and spite. Meanwhile, Mr Chaudhry has dismissed an offer by the Native Land Trust Board, which controls 90% of Fijian land, to offer firm 50-year agricultural leases in place of the expiring Agricultural Landlord and Tenant Act (ALTA). The ALTA provided for 30-year leases with the possibility of two 10-year extensions.

Mr Chaudhry said that 50 years compared unfavorable with the 99-year residential land leases obtainable from the board.

Constitutional amendments The attorney-general, Qoriniasi Bale, told a legal conference in November that a are delayed bill for making several uncontroversial amendments to the 1998 constitution would go to parliament in 2004. To obtain the support of three-quarters of MPs, the number required for the enactment of the amendments, the changes would need to be approved by the FLP. However, Mr Chaudhry has said that the cabinet issue must be settled before the constitution is dealt with.

Police commissioner seeks to In October the Commissioner of Police, Andrew Hughes (an Australian), who finish coup investigation soon took office in July, said that detectives from Australia and New Zealand were reviewing investigations of the 2000 coup. Mr Hughes added that after three years much had been achieved by the local police, but that people had to come forward with direct evidence, rather than rumours, if enquiries were to be completed. Mr Hughes has set a deadline of December 31st 2003 for the completion of seven major investigations currently under way. They cover the murder of rebel soldiers during an army mutiny in November 2000; the allegedly illegal removal of the president from office in 2000; the illegal swearing-in of rebel government ministers; and the alleged involvement in the coup of a former police commissioner, Isikia Savua, and seven prominent people named by a former senior army officer now serving with the New Zealand army. Of 2,438 people so far investigated for their role in the coup, 708 have been convicted and 235 acquitted or discharged, while 209 are awaiting trial.

Economic policy

The budget deficit target for According to figures presented in the 2004 budget unveiled on November 7th 2003 will be overshot 2003, the budget deficit for 2003 is estimated at 6% of GDP, considerably higher than originally budgeted. This not only reflects the government’s decision to loosen fiscal policy to encourage investment and spur employment growth, but also higher than budgeted spending and lower than expected revenues. At an estimated F$1.3bn (US$700m), total spending in 2003 is projected to be F$30m (US$16m) over budget, owing in part to the cost of hurricane damage caused by cyclone Ami in early 2003 and that of emergency supplementation of water supplies. Total revenue is likely to have reached F$1.1bn in 2003, F$56m lower than originally budgeted, mainly because the planned sale of government shares in some companies did not take place. The government hopes to reduce the budget deficit to 3.5% of GDP in 2004 by reducing expenditure (capital spending is projected to fall by 20% to F$221m in 2004), while total operating revenue is expected to rise by 6% year on year to F$1bn. The government has, however, achieved only limited success in meeting its budget deficit targets in recent years. The government plans to restructure its debt portfolio by converting short-term debt to longer-term maturities. Government debt has risen steadily in recent years, reaching F$1.9trn (US$995bn) at the end of 2002, 12% higher than in 2001 and up by 31% compared with 2000. The government estimates that by end-

2003 total debt will have reached F$2trn (comprising F$1.8trn of domestically held debt and F$218bn of externally held debt), although the total debt to GDP ratio is likely to have dropped from 47.7% of GDP at the end of 2002 to an estimated 45.9% at the end of 2003.

A mixed bag of tax changes is Also unveiled in the 2004 budget were plans to reduce both the rate of unveiled in the 2004 budget corporation tax and the top marginal rate of income tax from 32% to 31%; a cut in the rate of export tax on sugar and molasses from 10% to 3%; and the extension (and in some cases introduction) of a number of accelerated deprecation allowances for investment in buildings, renewable-energy plant and water storage facilities. The rate of excise duty on cigarettes and spirits will increase by 3%. Tariffs on more than 500 items will be increased from 10% to 15%, although tariffs on a small number of food items will be reduced from 20% to 15%.

Plans to scrap civil servants’ One of the more controversial elements of the budget was the government’s indexation are poorly received plan to scrap annual cost-of-living adjustments to civil service pay, a move that has, unsurprisingly, been met with considerable hostility from the major public- service trade unions. As an alternative, the government plans to link pay increases to a performance-based management system. The government also plans to establish an anti-corruption unit within the public prosecutor’s office.

Health officials warn of rising Alarmingly, at a health conference in November officials from the health HIV/AIDS cases ministry said the number of reported cases of HIV/AIDS, which has risen from under 30 to 130 in the past four years, could swell to 6,000 by 2015. Fiji Care, the country’s main health insurance company, said that premiums for Fijian males might have to rise after research showed that poor diet, lack of exercise and kava drinking had cut their average lifespan drastically, to under 50 years.

The domestic economy

Economic recovery is The economic recovery appears to have strengthened in the second half of threatened by sugar problems 2003, although pessimism about the future of the sugar industry, on which the livelihood of about one-quarter of the population depends, has grown. In November Mahendra Chaudhry, the leader of the National Farmers Union, threatened a farmers’ boycott of the 2004 harvest in protest at the government’s plan to begin restructuring the dying industry in April next year, 12 months behind schedule. He has also opposed the government’s plan to dismantle the independent supervisory body, the Fiji Sugar Commission, and other statutory institutions, to pave the way for the country’s four sugar mills to operate as separate commercial, stand-alone businesses. The sugar mills are currently run by the government-controlled and insolvent Fiji Sugar Corporation. Both the sugarcane harvest and sugar output are expected to fall slightly, to 3.1m and 308,000 tonnes respectively, in 2003, and drought in cane-growing areas, particularly in northern Fiji, is likely to reduce the 2004 harvest further. Once a world leader in the industry, Fiji is now one of the most inefficient producers of cane sugar. A rescue plan calls for capital spending of F$170m (US$90m) over a five-year period, with government guarantees for the industry peaking at

F$125m in 2005. Much depends on the willingness of the EU and the Asian Development Bank to assist the restructuring by providing finance and technical assistance. But time for a successful restructuring of the industry is running out: the EU sugar subsidies on which the industry is dependent are due to start decreasing, by an initial 20%, in 2006.

There are fears about the Exports of canned and fresh tuna are Fiji’s third-largest export, generating impact of overfishing foreign earnings of around F$90m in 2002. The government expects this level to be maintained, but Fiji Fish, the largest fishing and fresh tuna exporting business in the country, has said that one-half of the country’s fleet of 110 licensed fishing boats were at risk of going out of business owing to the slump in fish landings caused by overfishing. The company said that unless the licensed fleet was reduced to about 60 vessels, and illegal fishing curbed, it could be forced to close.

Tourist arrivals are set to reach The Fiji Visitors Bureau has said that visitor arrivals would this year exceed the a new record in 2003 previous record of 409,000 in 1999. According to the bureau, at least two new resorts, each with capacity of between 300 and 400 rooms, are needed urgently if growth in the tourism sector is to be sustained. There is, however, no shortage of developments in the pipeline. An Australian developer has announced plans for a F$70m, 250-room resort, to open in 2006 under the management of the Marriot chain, while the Accor group of France is preparing to build a 300-room property in partnership with Fiji’s national airline, Air Pacific. In addition, a New Zealand operator of three retirement villages said that it would build 250 retirement villas at Saweni Beach, near the international airport, and the government is nearing completion of a 12-km highway to give access to Natadola Beach, where the construction of resorts to be managed by two hotel chains, Canadian-based Four Seasons and the UK’s Intercontinental, is expected to begin next year.

There are signs of a recovery Anecdotal evidence suggests that foreign direct investment in Fiji, which in foreign direct investment slumped after the 2000 coup, is picking up. In November Emperor Gold Mines began work on a three-year, F$90m project to extend its Vatukoula mine. Increased production and higher international gold prices are expected to push up the country’s export earnings from gold from an estimated F$86m in 2003 to around F$134m in 2005. Meanwhile, in October a US company opened a call centre employing 350 people in Suva, having moved it from Mexico. Another call centre, this time owned by an Australian company, is due to open in Suva by the end of 2003 and could employ up to 6,000 workers. Finally, Fiji Water, owned by a Canadian company and now an important competitor for Perrier in the US market, has said it will invest F$20m to enlarge a bottling factory that is already exporting bottled water worth more than F$30m annually.

Inward remittances overtake A security company, Global Risk Strategies, has hired 485 Fijians, many of them earnings from sugar reservists, as security guards in Iraq. The Reserve Bank of Fiji (the central bank) has said that annual remittances from these and thousands of other Fijian citizens working abroad, including 1,500 men with the British army, will soon exceed foreign earnings from sugar exports, valued at around F$230m per year.